Chat with Gary Cohn

Ron Biscardi - CEO of context capital partners chats with Gary Cohn at the context summit 2019 in Miami.

Key Takeaways -

• White House vs Goldman Sachs - Goldman sachs has a very collegial atmosphere, everyone know everyone else, know their strengths and weaknesses and all work toward the twin goals of delighting clients and making money. The white house - you have no clue about whom you will be working with, their strengths and weaknesses and you are put together in a team with no clear agendas to deal with.
• US China Trade Deficit - 330 Bn size of trade deficit with China. Size of trade deficit can be reduced - that is not the point. The big issue is -
• Market access.
• Forced tech transfer.
• Intellectual property theft.
• US economy is now 80% services, hence we should aim at growing and getting competitive in our services sector. Closing the trade gap is not the end goal, making the economy stronger is.
• Tax Reforms - High taxes incentivize US companies to inverse. Tax reforms.attract, retain capital. Build in the us - grow economy faster , jobs and wages will grow faster.
• 3 kinds of tax rates - 1) Corporate 2) Pass through and 3) Personal. What was the need to cut personal tax rates? Because pass through tax rates are correlated to personal tax rates. Need to cut personal tax rates to move pass through rates lower as well - so that corporate to pass through spread is lower than 5%. (if they did not cut the personal tax rate, then pass through to corporate tax spread increased beyond 5% which would create problems)
• Haven’t seen tax filings for 2019 yet. However they have modeled lower collections till about 2.5 years and then it starts picking up as US companies start increasing their capex. For Capex there is a 5 year period of tax incentives, we are in the 2nd year now and tax incentives reduce on a sliding scale.
• Debt burden - Not everyone has to go to college. If a student goes to college - takes on a 250k debt burden. However if the student starts working as a plumber right out of school - then he/she can 350k in 5 years as plumber (70k / year).
• TPP - Peter Navarro wanted to kill TPP. Gary and team could not stop TPP getting killed. TPP would have been great, would have opened up agricultural markets in asia pacific to US companies. Shouldnt have killed tpp.
• Spending problem - The bigger problem which US has is a spending problem, not only a revenue problem. The government does not practice zero based budgeting. Budgets for last year get rolled forward without analyzing if last years spending was fruitful. Nobody is dealing with expense side of the equation. The size of the expense grows vs the last year - plus some percentage increase.